NOTE
      PURCHASE AGREEMENT

    


    This
      Note
      Purchase Agreement (the “Agreement”) is made and entered into on July 3, 2008,
      by and between Knight Energy Corp., a Maryland corporation, with its principal
      place of business located at 909 Lake Carolyn Parkway, Suite 850, Irving, Texas
      75039 (the “Company”), and the party listed on the attached “Schedule of
      Lenders” (the “Lender”). 

     

    Recitals

     

    A.
      The
      Company and the Lender are executing and delivering this Agreement in reliance
      upon the exemptions from securities registration afforded by (i) the provisions
      of Regulation D (“Regulation D”) as promulgated by the United States Securities
      and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended
      (the “1933 Act”), and (ii) Section 4(2) under the 1933 Act. 

     

    B.
      The
      Lender desires to purchase from the Company, and the Company desires to sell
      to
      the Lender, upon the terms and conditions stated in this Agreement, the
      Company’s $2,500,000 15% Senior Secured Promissory Note in the form attached as
Exhibit
      A (the
      “Note”). The Note shall be sold in a closing (the “Closing”) as specified
      herein. 

     

    C.
      Contemporaneously with the execution and delivery of this Agreement, the Company
      is executing and delivering to the Lender an Amendment to Security Agreement
      in
      the form attached as Exhibit
      B
      (the
“Amendment”), pursuant to which the Company has agreed to secure its obligations
      under the Note with a first-priority security interest in all existing and
      hereafter acquired assets owned by the Company. 

     

    D.
      As
      additional security for the Company’s obligations under the Note,
      contemporaneously with the execution and delivery of this Agreement, Charles
      Hill Drilling, Inc. (“CHD”), which is a wholly-owned subsidiary of the Company,
      is executing and delivering an Amendment to Corporate Guaranty in the form
      attached as Exhibit
      C
      (the
“Subsidiary Amendment”) pursuant to which CHD is guarantying payment of the Note
      and securing its obligations under that guaranty with a first-priority security
      interest in all of its existing and hereafter acquired assets. Contemporaneously
      with the execution and delivery of the Subsidiary Amendment, CHD is also
      executing and delivering to the Lender an amendment to the Deed of Trust,
      Security Agreement, Assignment of Production and Financing Statement from CHD
      to
      J. Patrick Murphy, Trustee, for the benefit of the Lender, dated May 20, 2008
      (the “Deed of Trust”), such amendment to be in the form attached as Exhibit
      D
      (the
“Amendment to Deed of Trust”). 

     

    Agreements

     

    NOW,
      THEREFORE, in consideration of their respective promises contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and the Lender hereby agree as follows:




    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    1.
      Purchase
      and Sale of the Note.
      

     

    (a)
      Purchase.
      At the
      Closing, the Lender agrees to purchase the Note from the Company, and the
      Company agrees to sell the Note to the Lender. The purchase price for the Note
      (the “Purchase Price”) shall be as set forth on the Schedule of Lenders. For the
      Closing, out of the Purchase Price there shall be paid (i) to the Lender a
      non-refundable origination fee in an amount equal to five percent (5%) of the
      Purchase Price and (ii) such other amounts as may be included in the
      Disbursement Instructions attached as Exhibit
      E (the
      “Disbursement Instructions”). The disbursements specified in the Disbursement
      Instructions shall be made on the Closing Date (as defined below). 

     

    (b)
      The
      Closing.
      The
      date of the Closing (the “Closing Date”) shall be July 3, 2008, or such other
      date as the parties may mutually agree in writing. On or before the Closing
      Date,  (i)
      the
      Lender shall have delivered the Purchase Price to the Escrow Agent (as defined
      in the Escrow Agreement in the form attached as Exhibit
      F (the
      “Escrow Agreement”)) in the manner set forth in paragraph (c) below, (ii) the
      Company shall have delivered to the Escrow Agent originals of (A) this
      Agreement, (B) the Note, (C) the Amendment, (D) the Subsidiary Amendment, (E)
      the Amendment to Deed of Trust, (F) the Disbursement Instructions, (G) the
      Escrow Agreement and (H) such other items as may be required by this Agreement
      or any of the other documents (collectively, the “Closing Documents”), each duly
      authorized and executed by the Company and/or any other parties thereto (other
      than the Lender) and (iii) the Lender shall have delivered to the Escrow Agent
      executed originals of those Closing Documents which are to be signed by the
      Lender. 

     

    (c)
      Payment.
      The
      Lender shall pay the Purchase Price by wire transfer of immediately available
      funds in United States Dollars, to be deposited into the Escrow Account (as
      defined in the Escrow Agreement), against delivery to the Escrow Agent of the
      Closing Documents by the Company. At the Closing, the Escrow Agent shall be
      responsible for disbursement of the Purchase Price according to the Disbursement
      Instructions and delivery of the Closing Documents to the Lender (with copies
      of
      the Closing Documents to the Company duly executed by the Lender, where
      required), in each case in accordance with the terms of the Escrow Agreement.
      

    


    2.
      The
      Lender’s Representations and Warranties.
      As of
      the Closing, the Lender represents and warrants to the Company, and agrees,
      as
      follows: 

     

    (a)
      Investment
      Purposes; Compliance With 1933 Act.
      The
      Lender is purchasing the Note for its own account for investment only and not
      with a view towards, or in connection with, the public sale or distribution
      thereof, except pursuant to sales registered, or exempt from registration,
      under
      the 1933 Act and applicable state securities laws. The Lender does not by its
      representations in this Section 2(a) agree to hold the Note for any minimum
      or
      other specific term, and reserves the right to dispose of the Note at any time
      in compliance with Section 5(a) below. 

     

    (b)
      Accredited
      Investor Status.
      The
      Lender is an “accredited investor,” as that term is defined in Rule 501(a) of
      Regulation D. The Lender has such knowledge and experience in financial and
      business matters that it is capable of evaluating the merits and risks of the
      investment made pursuant to this Agreement. The Lender is aware that it may
      be
      required to bear the economic risk of the investment made pursuant to this
      Agreement for an indefinite period of time, and is able to bear such risk.
      

     

    
      
        
        

      

      
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    (c)
      Reliance
      on Exemptions.
      The
      Lender understands that the Note is being offered and sold to it in reliance
      on
      specific exemptions from the registration requirements of applicable federal
      and
      state securities laws, and that the Company is relying upon the truth and
      accuracy of, and the Lender’s compliance with, the representations, warranties,
      agreements and covenants of the Lender set forth herein in order to determine
      the availability of such exemptions and the eligibility of the Lender to acquire
      the Note. 

     

    (d)
      Information.
      The
      Lender and its advisors, if any, have been furnished with all materials relating
      to the business, finances and operations of the Company and materials relating
      to the offer and sale of the Note that have been requested by the Lender. The
      Lender and its advisors, if any, have been afforded the opportunity to ask
      all
      questions of the Company as they have in their discretion deemed advisable.
      The
      Lender understands that its investment in the Note involves a high degree of
      risk. The Lender has sought such accounting, legal and tax advice as it has
      considered necessary to an informed investment decision with respect to the
      investment made pursuant to this Agreement. 

     

    (e)
      No
      Government Review.
      The
      Lender understands that no United States federal or state agency or any other
      government or governmental agency has approved or made any recommendation or
      endorsement of the Note or the fairness or suitability of the investment in
      the
      Note, nor have such authorities passed upon or endorsed the merits of the
      offering of the Note. 

     

    (f)
      Restrictions
      on Transfer or Resale.
      The
      Lender understands that: (i) the Note has not been and is not being registered
      under the 1933 Act or any state securities laws and may not be offered for
      sale,
      sold or otherwise transferred except as provided in Section 5(a) below and
      (ii)
      neither the Company nor any other person is under any obligation to register
      the
      Note under the 1933 Act or any state securities laws or to comply with the
      terms
      and conditions of any exemption thereunder. 

     

    (g)
      Legend.
      Subject
      to Section 5(b) below, the Lender understands that the Note will bear a
      restrictive legend (the “Legend”) in substantially the following form:


     

    THIS
      NOTE
      HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
      LAWS
      OF ANY STATE (COLLECTIVELY, THE “LAWS”). THIS NOTE MAY NOT BE OFFERED FOR SALE,
      SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE
      REGISTRATION STATEMENT FOR THE NOTE UNDER THE APPLICABLE LAWS OR (II) AN OPINION
      OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER,
      TO
      THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED DUE TO AN AVAILABLE EXEMPTION
      FROM THE REGISTRATION REQUIREMENTS OF THE APPLICABLE LAWS. 

     

    (h)
      Authorization;
      Enforcement.
      The
      Closing Documents to be signed by the Lender have been duly and validly
      authorized, executed and delivered by the Lender and are each valid and binding
      agreements of the Lender enforceable in accordance with their respective terms,
      subject as to enforceability to general principles of equity and to bankruptcy,
      insolvency, moratorium and other similar laws affecting the enforcement of
      creditors’ rights generally. 


    
      
        
        

      

      
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    3.
      The
      Company’s Representations and Warranties. As
      of the
      Closing, the Company represents and warrants to the Lender, and agrees, as
      follows: 

     

    (a)
      Organization
      and Qualification.
      The
      Company is a corporation duly organized and existing in good standing under
      the
      laws of the State of Maryland, and has the requisite power to own its properties
      and to carry on its business as now being conducted. CHD is a corporation duly
      organized and existing in good standing under the laws of the State of Nevada,
      and has the requisite power to own its properties and to carry on its business
      as now being conducted. Both the Company and CHD are duly qualified as foreign
      entities to do business and are in good standing in every other jurisdiction
      in
      which the nature of the business conducted by them makes such qualification
      necessary and where the failure so to qualify would have a Material Adverse
      Effect. As used herein, “Material Adverse Effect” means any material and adverse
      effect on (i) the assets, liabilities, sales, financial condition, business,
      operations, affairs, circumstances or prospects of the Company and its
      subsidiaries (taken as a whole) from those reflected in the SEC Documents (as
      defined below) or from the facts represented or warranted in the Closing
      Documents, (ii) the ability of the Company and its subsidiaries to carry out
      their businesses as the same are being conducted or are proposed to be conducted
      at the date of this Agreement or to meet their obligations under the Closing
      Documents on a timely basis or (iii) the rights and remedies of the Lender
      under
      the Closing Documents. 

     

    (b)
      Authorization;
      Enforcement.
      The
      Company and CHD each have the requisite power and authority to enter into and
      perform the Closing Documents to which each is a party. The Company has the
      requisite power and authority to issue and sell the Note in accordance with
      the
      terms thereof, and to perform its obligations under the Note in accordance
      with
      their terms. The Company’s and CHD’s execution, delivery and performance of the
      Closing Documents to which each is a party, and their consummation of the
      transactions contemplated thereby, have been duly authorized by the Company’s
      and CHD’s Board of Directors, and no further consent or authorization of the
      Company or CHD, their shareholders, or any other person or entity, is required.
      The Closing Documents to which the Company and CHD are parties (i) have been
      duly and validly authorized, executed and (when issued) delivered by the Company
      and/or CHD (as the case may be) and (ii) constitute valid and binding
      obligations of the Company and/or CHD (as the case may be), enforceable against
      the Company and/or CHD (as the case may be) in accordance with their respective
      terms, subject as to enforceability to general principles of equity and to
      bankruptcy, insolvency, moratorium and other similar laws affecting the
      enforcement of creditors’ rights generally. 

     

    (c)
      Capitalization.
      As of
      the Closing Date, the authorized capital stock of the Company consisted of
      (i)
      500,000,000 shares of $.0001 par value common stock, of which 31,145,785 shares
      were issued and outstanding or issuable, and (ii) 50,000,000 shares of preferred
      stock, of which -0-shares were issued and outstanding. All of such outstanding
      shares have been validly issued and are fully paid and non-assessable. As of
      the
      Closing Date, except as disclosed in the attached Schedule
      3(c),
      (i)
      there were no outstanding options, warrants, scrip, rights to subscribe to,
      calls or commitments of any character whatsoever issued or agreed to by the
      Company or CHD relating to, or securities or rights convertible into, any equity
      interests of the Company or CHD, or arrangements by which the Company or CHD
      is
      or may become bound to issue additional equity interests and (ii) there
      are
      no outstanding debt securities of the Company or CHD. If requested by the
      Lender, the Company has furnished to the Lender true and correct copies of
      the
      Company’s and CHD’s Articles of Incorporation, as in effect on the date hereof
      (the “Articles of Incorporation”), and the Company’s and CHD’s Bylaws, as in
      effect on the date hereof. 

     

    
      
        
        

      

      
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    (d)
      Acknowledgment
      Regarding Lender’s Purchase of the Note.
      Except
      as disclosed on Schedule
      3(d),
      (i) the
      Lender is not acting as a financial advisor to, or fiduciary of, the Company
      or
      CHD (or in any similar capacity) with respect to this Agreement or the
      transactions contemplated hereby, (ii) this Agreement and the transactions
      contemplated hereby, and the relationship between the Lender and the Company
      and
      CHD, are and will be considered “arms-length” notwithstanding any other or prior
      agreements or nexus between the Lender and the Company and/or CHD, whether
      or
      not disclosed, and (iii) any statements made by the Lender, or any of its
      representatives or agents, in connection with this Agreement and the
      transactions contemplated hereby are not to be construed as advice or a
      recommendation, are merely incidental to the Lender’s purchase of the Note and
      have not been relied upon in any way by the Company or CHD or their respective
      management. The Company’s decision to enter into this Agreement and the
      transactions contemplated hereby have been based solely upon an independent
      evaluation by the Company and its management. 

     

    (e)
      No
      Integrated Offering.
      Neither
      the Company nor any of its affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances which would prevent
      the parties hereto from consummating the transactions contemplated hereby
      pursuant to an exemption from registration under the 1933 Act and, specifically,
      in accordance with the provisions of Regulation D.
      The
      transactions contemplated hereby are exempt from the registration requirements
      of the 1933 Act, assuming the accuracy of the representations and warranties
      of
      the Lender contained herein. 

     

    (f)
      No
      Conflicts.
      Except
      as set forth in the attached Schedule
      3(f),
      neither
      the Company nor CHD (i) is in violation of its Articles of Incorporation and
      (ii) is in default (and no event has occurred which, with notice or lapse of
      time or both, would put the Company or CHD in default) under, nor has there
      occurred any event giving others (with notice or lapse of time or both) any
      rights of termination, amendment, acceleration or cancellation of, any material
      agreement, indenture or other instrument to which the Company or CHD is a party,
      except for defaults or rights as would not, in the aggregate or individually,
      have a Material Adverse Effect. The business of the Company and CHD is not
      being
      conducted and, so long as the Lender owns the Note, shall not be conducted,
      in
      violation of any law, ordinance or regulation of any governmental entity, except
      for possible violations which neither singly nor in the aggregate would have
      a
      Material Adverse Effect. Except as specifically contemplated by this Agreement
      or as required under the 1933 Act and any applicable state securities laws,
      neither the Company nor CHD is required to obtain any consent, authorization
      or
      order of, or make any filing or registration with, any court or governmental
      agency in order for it to execute, deliver and perform any of its obligations
      under the Closing Documents in accordance with the terms thereof. 

     

    
      
        
        

      

      
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    (g)
      SEC
      Documents; Financial Statements.
      Except
      as disclosed on Schedule
      3(g) hereof,
      the Company has timely filed all reports, schedules, forms, statements and
      other
      documents required to be filed by it with the SEC pursuant to the reporting
      requirements of the Securities Exchange Act of 1934, as amended (the “1934
      Act”), with all of the foregoing that were filed prior to the date hereof and
      all exhibits included therein and all financial statements and schedules thereto
      and all documents (other than exhibits) incorporated by reference therein being
      hereinafter referred to as the “SEC Documents.” The Company has delivered to the
      Lender (to the extent requested by the Lender) true and complete copies of
      the
      SEC Documents. As of their respective dates, the SEC Documents complied in
      all
      material respects with the requirements of the 1934 Act and the applicable
      rules
      and regulations of the SEC promulgated thereunder, and none of the SEC
      Documents, at the time they were filed with the SEC, contained any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein in order to make the statements therein, in light of the
      circumstances under which they were made, not misleading. As of their respective
      dates, the financial statements of the Company included in the SEC Documents
      complied as to form in all material respects with applicable accounting
      requirements and the published rules and regulations of the SEC with respect
      thereto. Such financial statements (i) have been prepared in accordance with
      generally accepted accounting principles, consistently applied, during the
      periods involved except (A) as may be otherwise indicated in such financial
      statements or the notes thereto or (B) in the case of unaudited interim
      statements, to the extent they may exclude footnotes or may be condensed or
      summary statements and (ii) fairly present in all material respects the
      financial position of the Company as of the dates thereof and the results of
      its
      operations and cash flows for the periods then ended (subject, in the case
      of
      unaudited statements, to normal year-end audit adjustments). No information
      provided by or on behalf of the Company to any Lender contains any untrue
      statement of a material fact or omits to state any material fact required to
      be
      stated therein in order to make the statements therein, in the light of the
      circumstances under which they are or were made, not misleading. Except as
      set
      forth in the financial statements of the Company included in the SEC Documents,
      the Company has no liabilities, contingent or otherwise, other than (i)
      liabilities incurred in the ordinary course of business subsequent to the date
      of such financial statements and (ii) obligations under contracts and
      commitments incurred in the ordinary course of business and not required under
      generally accepted accounting principles to be reflected in such financial
      statements, in each case of clauses (i) and (ii) above, which, individually
      or
      in the aggregate, are not material to the financial condition, business,
      operations, properties, operating results or prospects of the Company. The
      SEC
      Documents contain a complete and accurate description of all written and oral
      contracts, agreements, leases or other instruments to which the Company or
      any
      subsidiary is a party or by which the Company or any subsidiary is bound which
      are required by the rules and regulations promulgated by the SEC to be disclosed
      (each a “Contract”). None of the Company, its subsidiaries or, to the best of
      the Company’s knowledge, any of the other parties thereto, is in breach or
      violation of any Contract, which breach or violation would, or with the lapse
      of
      time, the giving of notice, or both, have a Material Adverse Effect.


     

    (h)
      Absence
      of Certain Changes; Bankruptcy.
      Since
      December 31, 2007, there has been no Material Adverse Effect. Neither the
      Company nor CHD has taken any steps, and neither currently has any reasonable
      expectation of taking any steps, to seek protection pursuant to any bankruptcy
      law, nor does the Company or CHD have any knowledge that its creditors intend
      to
      initiate involuntary bankruptcy proceedings. 

     

    (i)
      Absence
      of Litigation.
      Except
      as set forth in the attached Schedule
      3(i),
      there
      is no action, suit, proceeding, inquiry or investigation before or by any court,
      public board or governmental body pending or, to the knowledge of the Company,
      threatened against or affecting the Company or any of its subsidiaries, wherein
      an unfavorable decision, ruling or finding would have a Material Adverse Effect
      or which would materially and adversely affect the validity or enforceability
      of, or the authority or ability of (i) the Company to perform its obligations
      under this Agreement or any of the documents contemplated herein or (ii) CHD
      to
      perform its obligations under the Subsidiary Amendment. 

     

    
      
        
        

      

      
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    (j)
      Foreign
      Corrupt Practices.
      Neither
      the Company nor any of its subsidiaries, nor any person acting on behalf of
      the
      Company or any subsidiary has, in the course of his, her or its actions for
      or
      on behalf of the Company, (i) used any of the Company’s funds for any unlawful
      contribution, gift, entertainment or other unlawful expense relating to
      political activity, (ii) made any direct or indirect unlawful payment to any
      foreign or domestic government official or employee from the Company’s funds,
      (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt
      Practices Act of 1977, as amended, or (iv) made any bribe, rebate, payoff,
      influence payment, kickback or other unlawful payment to any foreign or domestic
      government official or employee. 

     

    (k)
      Brokers;
      No General Solicitation.
      Except
      as set forth in Schedule
      3(k),
      neither
      the Company nor any subsidiary has taken any action that would give rise to
      any
      claim by any person for brokerage commissions, finder’s fees or similar payments
      relating to this Agreement and the transactions contemplated hereby other than
      as set forth in the Disbursement Instructions. The Company acknowledges that,
      except as set forth in Schedule
      3(k),
      no
      broker or finder was involved with respect to the transactions contemplated
      hereby other than as set forth in the Disbursement Instructions. Neither the
      Company nor any other person or entity participating on the Company’s behalf in
      the transactions contemplated hereby, nor any person or entity acting for the
      Company or any such other person or entity, has conducted any “general
      solicitation,” as described in Rule 502(c) under Regulation D, with respect to
      the Note. 

     

    (l)
      Status of Assets.
      Except
      as described on Schedule
      3(l) and
      except as arise by operation of law, the Company and its subsidiaries have
      good
      and marketable title to each of the assets that is material to its business,
      free and clear of all liens, claims, restrictions and other encumbrances. All
      of
      the outstanding shares of CHD are owned by the Company. 

     

    4.
      Covenants
      of the Parties. 

     

    (a)
      Best
      Efforts.
      Each
      party shall use its best efforts to timely satisfy each of the conditions to
      be
      satisfied by it as provided in Sections 6 and 7 of this Agreement. 

     

    (b)
      Securities
      Laws.
      The
      Company shall timely file a Form D (and any other equivalent form or notice
      required by applicable state law) with respect to the issuance of the Note
      if
      and as required under Regulation D and applicable state securities laws, and
      shall, upon written request of the Lender, provide a copy thereof to the Lender
      within five (5) days of such request. The Company shall, on or before the
      Closing Date, take all action necessary in order to sell the Note to the Lender
      in compliance with federal and applicable state securities laws, and shall
      provide written evidence of such action to the Lender upon written request.
      

     

    (c)
      Intentional
      Acts or Omissions.
      No
      party shall intentionally perform or fail to perform any act that, if performed
      or omitted to be performed, would prevent or excuse the performance of this
      Agreement or any of the transactions contemplated hereby. 

     

    
      
        
        

      

      
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    (d)
      Expense
      Reimbursement.
      The
      Company agrees to pay all reasonable fees and expenses (including reasonable
      business, legal, appraisal and post-Closing monitoring fees and expenses)
      incurred by the Lender in connection with this Agreement as the Lender may
      reasonably request from time-to-time; provided, however, that in the absence
      of
      a default under any of the Closing Documents, the Lender shall not be entitled
      to reimbursement for post-Closing monitoring fees more than two times per year.
      Upon demand, the Company agrees to pay, or reimburse the Lender for, all such
      fees and expenses, regardless of whether they are incurred before or after
      the
      date of this Agreement. 

     

    (e)
      Status;
      Taxes.
      Until
      the Note has been paid in full, the Company shall maintain its existence and
      the
      existence of CHD in good standing and shall pay all taxes, and shall cause
      CHD
      to pay all of its taxes, before they become delinquent, except for taxes that
      are reasonably disputed or which, if not paid, would not have a Material Adverse
      Effect. 

     

    (f)
      Use
      of
      Proceeds.
      The
      Company shall use the Purchase Price only for (i) those disbursements listed
      in
      the Disbursement Instructions and (ii) the purchase and subsequent refurbishment
      of the items described on the attached Schedule
      4(f) (collectively,
      the “Assets”). On the Closing Date, the net Purchase Price (after the
      disbursements listed in the Disbursement Instructions) shall be deposited by
      the
      Company in a separate bank account (the “Account”) and the funds therein shall
      not be drawn upon (i) except for use as provided in clause (ii) above and (ii)
      until the Lender has provided its written consent to such draw down, which
      shall
      be provided within three (3)
      days
      after the Lender receives a copy of the purchase order or invoice for
      refurbishment work (as applicable) with respect to such draw down. For
      monitoring purposes, the Company shall either (i)
      provide the Lender with online access to the Account (viewing only) or (ii)
      provide the Lender with copies of all statements with respect the Account within
      three (3) days after receipt by the Company. 

     

    (g)
      No
      Post-Closing Debt.
      Until
      the Note has been paid in full, unless otherwise agreed upon by the Lender
      in
      writing, in its sole discretion, neither the Company nor CHD shall incur any
      debt for borrowed money after the Closing Date. 

     

    (h)
      Monthly
      Financial and Other Information.
      Until
      the Note has been paid in full, within thirty (30) days after the end of each
      calendar month, the Company shall provide the Lender with a report,
      electronically or in writing, that includes (i) a listing of all of the
      Collateral (as defined below) as of the end of such calendar month, (ii) the
      cash flow status of the Collateral as of the end of such calendar month, (iii)
      unaudited consolidated financial statements for such calendar month (in
      accordance with generally accepted accounting principles (“GAAP”)), (iv) a
      description of any material change in the Company or any of its subsidiaries
      during such calendar month, (v) a description of any material legal action
      pending or threatened against the Company, any of its subsidiaries, or any
      present or former officer or director of the Company or any of its subsidiaries,
      during such calendar month and (vi) such other financial or business information
      as the Lender may from time-to-time reasonably request, all in a format that
      is
      mutually agreeable to the Company and the Lender. The Company shall also furnish
      to the Lender, from time-to-time, such reports in connection with the collateral
      described in the Security Agreement (as defined in the Amendment), the
      Subsidiary Security Agreement (as defined in the Subsidiary Amendment) and/or
      the Deed of Trust as the Lender may reasonably request, all in reasonable
      detail, including reports describing the equipment and as-extracted collateral,
      specifying the locations of the equipment and as-extracted collateral, and
      setting forth the then current location of the Company’s books pertaining to the
      collateral described in the Security Agreement, the Subsidiary Security
      Agreement and/or the Deed of Trust. In addition, unless otherwise notified
      by
      the Lender, during each calendar month the Company shall hold a monthly review
      meeting (or teleconference) with the Lender at a mutually agreeable place and
      time. To the extent reasonably requested by the Company, the Lender shall
      execute a confidentiality agreement with respect any non-public information
      disclosed pursuant to this Agreement. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (i)
      Minimum
      Cash and EBITDA.
      Until
      the Note has been paid in full, beginning on the first day of the month in
      which
      the Closing Date occurs and as of the first day of each calendar month
      thereafter, the Company shall maintain its cash and cash equivalents and EBITDA
      in excess of the minimum amounts set forth below for each date:

     

    
      	
              Calendar
                Month

            	 	
              Cash and Equivalents

            	 	
              EBITDA

            	 
	 	 	 	 	 	 
	
              July
                2008 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              27,291

            	 
	
               

            	 	 	 	 	 	 	 
	
              August
                2008 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              68,228

            	 
	
               

            	 	 	 	 	 	 	 
	
              September
                2008 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              86,422

            	 
	
               

            	 	 	 	 	 	 	 
	
              October
                2008 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              128,487

            	 
	
               

            	 	 	 	 	 	 	 
	
              November
                2008 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              179,881

            	 
	
               

            	 	 	 	 	 	 	 
	
              December
                2008 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              205,578

            	 
	
               

            	 	 	 	 	 	 	 
	
              January
                2009 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              213,035

            	 
	
               

            	 	 	 	 	 	 	 
	
              February
                2009 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              248,541

            	 
	
               

            	 	 	 	 	 	 	 
	
              March
                2009 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              248,541

            	 
	
               

            	 	 	 	 	 	 	 
	
              April
                2009 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              288,840

            	 
	
               

            	 	 	 	 	 	 	 
	
              May
                2009 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              288,840

            	 
	
               

            	 	 	 	 	 	 	 
	
              June
                2009 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              311,059

            	 
	
               

            	 	 	 	 	 	 	 
	
              July
                2009 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              339,698

            	 
	
               

            	 	 	 	 	 	 	 
	
              August
                2009 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              339,698

            	 
	
               

            	 	 	 	 	 	 	 
	
              September
                2009 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              365,829

            	 
	
               

            	 	 	 	 	 	 	 
	
              October
                2009 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              388,929

            	 
	
               

            	 	 	 	 	 	 	 
	
              November
                2009 

            	 	
              $

            	
              150,000

            	 	
              $

            	
              388,929

            	 
	
               

            	 	 	 	 	 	 	 
	
              December
                2009 and thereafter

            	 	
              $

            	
              150,000

            	 	
              $

            	
              418,847

            	 


    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    


    (j)
      Distributions
      and Redemptions.
      Until
      the Note has been paid in full, neither the Company nor any subsidiary shall
      (i)
      purchase, redeem or otherwise acquire for value any of its equity securities
      now
      or hereafter outstanding or (ii) make any distribution of its assets to its
      shareholders, other than distributions by CHD to the Company. 

     

    (k)
      Sale
      of Assets; Leasebacks; Management Fees.
      Until
      the Note has been paid in full, the Company shall not, and shall not permit
      any
      subsidiary to, enter into any arrangements, directly or indirectly, with any
      person or entity, whereby any of them shall (i) sell or transfer any assets,
      whether now owned or hereafter acquired, outside of the ordinary course of
      business, (ii) rent or lease as lessee such assets (or any part thereof) or
      any
      other property which any of them intends to use for substantially the same
      purpose or purposes as the property to be sold or transferred or (iii) pay
      any
      management fee or similar type of fee to any person or entity, except that
      payments to Nortia Capital Partners, Inc. pursuant to an agreement that is
      listed as an Exhibit to the Company’s Form 10-KSB for the fiscal year ended
      December 31, 2007, shall be permitted. To the extent there is a sale of the
      Assets in the ordinary course of business, the Company shall notify the Lender
      of such sale in writing and shall offer to repay the outstanding principal
      amount of the Note in an amount equal to the sale price (which offer may be
      accepted or rejected by the Lender, in its sole discretion) unless (i) the
      sale
      price is less than $100,000 or (ii) within thirty (30) days of receipt, the
      sale
      proceeds are expended to purchase new Assets with a value comparable to the
      ones
      sold, in which case no repayment offer shall be required. 

     

    (l)
      Collateral
      Coverage Ratio.
      Until
      the Note has been paid in full, the Company shall not permit at any time its
      “Collateral Coverage Ratio” to be less than 4.5x. For purposes of this
      paragraph, “Collateral Coverage Ratio” shall mean, as of any date, an amount
      equal to the ratio of (i) the sum of (A) the cash and cash equivalents plus
      net
“Eligible Accounts Receivable” of the Company and its consolidated subsidiaries,
      plus (B) 70% of the PV-10 of the Company’s proven developed reserves and 50% of
      the PV-10 of the Company’s proven undeveloped reserves (with the reserve numbers
      to be taken from a reserve report provided by an independent engineering firm
      acceptable to the Lender, which shall be updated as required by the Lender,
      but
      no less than annually), plus (C) the orderly liquidation value of the Company’s
      drilling rigs based on a third-party appraisal company acceptable to the Lender,
      which shall be updated as required by the Lender, but no less than annually,
      plus (D) 25% of the net book value of any fixed assets owned by the Company
      and
      not included in (B) or (C) above, all determined as of the end of each calendar
      month in which the Note remains outstanding (beginning with June, 2008) on
      a
      consolidated basis in accordance with GAAP and reflected on the Company’s
      consolidated balance sheet (collectively, the “Collateral”), to (ii) the unpaid
      principal amount of the Note. For purposes of this paragraph, the term “Eligible
      Accounts Receivable” shall mean accounts receivable that do not include (i)
      accounts which are unpaid more than 90 days from the invoice date thereof,
      or
      that were not billed in the ordinary course of the Company’s or its
      subsidiaries’ businesses (provided, however, that failure to bill on specific
      dates as provided in customer terms and conditions or other instances where
      the
      Company’s or its subsidiaries’ actions are immaterially different from their
      stated billing practices will not be deemed to be outside of the Company’s and
      its subsidiaries’ ordinary course of business, (ii) any account for which there
      exists a right of set-off, allowance, adjustment, defense or discount (except
      regular discounts allowed in the ordinary course of business to promote prompt
      payment (and for which no defense or counterclaim has been asserted)), solely
      to
      the extent of such set-off, allowance, adjustment, defense or discount, (iii)
      any account arising from a “consignment,” (iv)
      any
      account which arises from the sale or lease to, or performance of services
      for,
      or represents an obligation of, an employee, partner, parent or subsidiary
      of
      the Company or any affiliate of the Company or subsidiary, (v) any account
      arising from sales of goods or services in which the performance of the Company
      or its subsidiary has been bonded by an issued performance bond, (vi) any
      account which any manager of the Company or any subsidiary has knowledge that
      the account debtor has claimed that such account is subject to set-off,
      counterclaim, defense, allowance or adjustment, solely to the extent of such
      set-off, counterclaim, defense, allowance or adjustment, (vii) any account
      where
      the account debtor is the subject of bankruptcy or insolvency proceedings and
      (viii) any account generated by a subsidiary not domiciled in the United States
      of America or where the account debtor is not domiciled in the United States
      of
      America, subject to an allowance for up to $200,000 of such accounts to be
      included in Eligible Accounts Receivable.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    


    (m)
      Financial
      Statements.
      Until
      the Note has been paid in full, (i) within forty-five (45) days after the end
      of
      each of the first three fiscal quarters (plus any filing extension to which
      the
      Company may be entitled based on a timely filing on Form 12b-25), the Company
      shall provide the Lender with unaudited consolidated financial statements of
      the
      Company and its subsidiaries for such fiscal quarter and (ii) within ninety
      (90)
      days after the end of each fiscal year (plus any filing extension to which
      the
      Company may be entitled based on a timely filing on Form 12b-25), the Company
      shall provide the Lender with audited consolidated financial statements of
      the
      Company and its subsidiaries for such fiscal year, in each case prepared by
      an
      accounting firm mutually acceptable to the Company and the Lender. 

     

    (n)
      Subsidiaries.
      In the
      event that the Company has any subsidiary other than CHD in existence at any
      time prior to the full payment of the Note, the Company shall cause each such
      subsidiary to guaranty the repayment of the Note (and related expenses) and
      secure such guaranty with a first-priority security interest in all of its
      assets, in each case pursuant to documentation substantially in the same form
      as
      the Subsidiary Guaranty (as defined in the Subsidiary Amendment), the Subsidiary
      Security Agreement and the Deed of Trust (if applicable). 

     

    (o)
      Appraisal
      of Assets.
      At the
      Company’s expense, within thirty (30) days after the Company completes the
      acquisition of an Asset, the Company shall provide the Lender with an appraisal
      of such Asset by an appraiser mutually acceptable to the Company and the Lender.
      

     

    (p)
      Indemnification.
      Upon
      demand, the Company shall indemnify the Lender and its affiliates for, and
      shall
      defend and hold the Lender and its affiliates harmless against, any loss,
      damage, liability, cost or expense (including, but not limited to, reasonable
      attorney’s fees and costs of investigation) arising out of or in connection with
      any claim or cause of action that is brought or threatened against the Lender
      and/or its affiliates by any person or entity (other than the Company) as a
      result of the Lender entering into this Agreement or any of the other Closing
      Documents and/or performing its obligations hereunder or thereunder, except
      to
      the extent such loss, damage, liability, cost or expense has resulted from
      the
      gross negligence or wilful misconduct of the Lender or its affiliates. The
      obligations in this Section shall survive the termination of this Agreement
      and
      the repayment of the Note. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (q)
      No
      Changes to Certain Agreements.
      Unless
      consented to in writing by the Lender, until the Note has been paid in full,
      the
      Company shall not (i) materially modify any employment, consulting, advisory
      or
      other services agreement between the Company and any of its officers, directors
      or Nortia Capital Partners, Inc. that exists as of the Closing Date (all of
      which agreements are listed as Exhibits to the Company’s Form 10-KSB for the
      fiscal year ended December 31, 2007) or (ii) enter into any new agreement with
      any of its officers, directors or Nortia Capital Partners, Inc. or any of their
      affiliates involving employment, consulting, advisory or other services or
      providing for any compensation to such persons. 

     

    (r)
      Limitation
      on Payment of Legal Fees.
      Unless
      consented to in writing by the Lender, until the Note has been paid in full,
      the
      Company shall not directly or indirectly pay on behalf of any person, or
      reimburse any person for, any legal fees incurred by such person in any matter
      except one which relates solely to such person’s alleged acts or omissions on
      behalf of the Company. 

     

    (s)
      Listing
      on the American Stock Exchange; Independent Board.
      Company
      shall use its best efforts to cause its common stock to be listed for trading
      on
      the American Stock Exchange (“AMEX”) by November 20, 2008. In addition, the
      Company agrees that a majority of its Board of Directors shall be “independent”
according to AMEX standards (the “Independence Standard”) by November 20, 2008.
      In the event that the Independence Standard is not met by the deadline, the
      Note’s Rate (as defined in the Note) shall increase by two percent (2%) until
      the Independence Standard is met. 

     

    (t)
      Legal
      Opinion.
      Within
      twenty-one (21) days after the Closing Date, the Company’s counsel shall have
      provided an opinion that is reasonably satisfactory to the Lender with respect
      to such matters as the Lender may designate. 

     

    5.
      Transfer,
      Legend and Related Matters.
      

     

    (a)
      Transfer
      of a Note.
      Subject
      to the provisions of Section 8(g) below, if (i) the Note has been registered
      under the 1933 Act and applicable state securities laws, (ii) the Lender shall
      have delivered to the Company an opinion by counsel reasonably satisfactory
      to
      the Company, in form, scope and substance reasonably satisfactory to the
      Company, to the effect that the Note or any interest therein may be sold or
      transferred pursuant to an exemption from such registration or (iii) the Lender
      notifies the Company in writing that it is transferring the Note or any interest
      therein to an accredited investor then, in each instance, the Lender may
      transfer the Note or interest, as the case may be, upon the reasonable consent
      of the Company; provided, however, that the Lender may transfer the Note or
      any
      interest therein to HD Special-Situations Offshore Fund, Ltd. at any time
      without consent upon written notice to the Company (with the Lender hereby
      representing and warranting to the Company that HD Special-Situations Offshore
      Fund, Ltd. is an accredited investor). 

    


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (b)
      Removal
      of Legend.
      The
      Legend shall be removed from the Note, if, unless otherwise required by state
      securities laws, (i) the sale of the Note is registered under the 1933 Act
      or
      (ii) the holder of the Note provides the Company with an opinion by counsel
      reasonably satisfactory to the Company, that is in form, substance and scope
      reasonably satisfactory to the Company, to the effect that a public sale or
      transfer of the Note may be made without registration under the 1933 Act.


    


    (c)
      Injunctive
      Relief for Breach.
      The
      Company acknowledges that a breach of its obligations under Sections 5(a) and/or
      5(b) above will cause irreparable harm to the Lender by vitiating the intent
      and
      purpose of the transactions contemplated hereby. Accordingly, the Company agrees
      that the remedy at law for a breach of its obligations under such Sections
      would
      be inadequate and agrees that, in the event of a breach or threatened breach
      by
      the Company, the Lender shall be entitled, in addition to all other remedies
      at
      law or in equity, to an injunction restraining any breach and/or requiring
      immediate appropriate action by the Company, without the necessity of showing
      economic loss and without any bond or other security being required.


    


    6.
      Conditions
      to the Company’s Obligation to Sell.
      The
      obligation of the Company hereunder to sell the Note to the Lender at the
      Closing is subject to the satisfaction, on or before the Closing Date, of each
      of the following conditions; provided, however, that these conditions are for
      the Company’s sole benefit and may be waived in writing by the Company at any
      time in its sole discretion: 

     

    (a)
      The
      Lender shall have (i) executed each of the Closing Documents to the extent
      required thereby and (ii) delivered such documents or signature pages thereof
      (via facsimile or as otherwise provided in the Escrow Agreement), together
      with
      such other items as may be required by this Agreement, to the Escrow Agent.
      

    


    (b)
      The
      Lender shall have delivered to the Escrow Agent on behalf of the Company, and
      the Company shall have received from the Escrow Agent pursuant to the terms
      of
      Escrow Agreement, the Purchase Price by wire transfer of immediately available
      funds. 

    


    (c)
      The
      representations and warranties of the Lender in this Agreement shall be true
      and
      correct in all material respects as of the date made and as of the Closing
      Date
      as though made at that time (except for representations and warranties that
      speak as of a specific date), and the Lender shall have performed, satisfied
      and
      complied in all material respects with the covenants, agreements and conditions
      required by this Agreement to be performed, satisfied or complied with by the
      Lender at or prior to the Closing Date. 

    


    (d)
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered or issued by any court or governmental authority
      of
      competent jurisdiction or any self-regulatory organization having authority
      over
      the matters contemplated hereby which restricts or prohibits the consummation
      of
      any of the transactions contemplated herein. 

    


    7.
      Conditions
      to the Lender’s Obligation to Purchase.
      The
      obligation of the Lender to purchase the Note at the Closing is subject to
      the
      satisfaction, on or before the Closing Date, of each of the following
      conditions; provided, however, that these conditions are for the sole benefit
      of
      the Lender and may be waived by the Lender at any time in its sole discretion:
      

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (a)
      There
      shall have been no Material Adverse Effect on the Company and the Company shall
      have paid or caused the payment of all fees and expenses due to the Lender
      and/or counsel for the Lender as required by this Agreement. 

    


    (b)
      The
      Company and each other person (other than the Lender) who is required to execute
      the Closing Documents shall have (i) executed each of the Closing Documents
      to
      the extent required thereby and (ii) delivered such documents or signature
      pages
      thereof (via overnight delivery or as otherwise provided in the Escrow
      Agreement), together with such other items as may be required by this Agreement,
      to the Escrow Agent. 

    


    (c)
      The
      Company shall have issued and have duly executed by the authorized personnel
      of
      the Company and delivered to the Escrow Agent on behalf of the Lender, the
      Lender’s original Note (via overnight delivery or as otherwise provided by the
      Escrow Agreement). 

    


    (d)
      The
      representations and warranties of the Company shall be true and correct in
      all
      material respects as of the date made and as of the Closing Date as though
      made
      at that time (except for representations and warranties that speak as of a
      specific date), and the Company shall have performed, satisfied and complied
      with the covenants, agreements and conditions required by this Agreement to
      be
      performed, satisfied or complied with by the Company at or prior to the Closing
      Date, including obtaining all consents and approvals required for it to enter
      into and consummate the Closing Documents. 

    


    (e)
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, or issued by any court or governmental authority
      of
      competent jurisdiction or any self-regulatory organization having authority
      over
      the matters contemplated hereby which restricts or prohibits the consummation
      of
      any of the transactions contemplated herein. 

    


    8.
      Governing
      Law; Miscellaneous.
      

    


    (a)
      Governing
      Law.
      This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of California as applied to contracts made and to be fully performed
      in such state, without regard to the conflicts of laws provisions thereof.
      Service of process in any civil action relating to or arising out of this
      Agreement (including all Exhibits or Schedules or any addenda hereto) or the
      transactions contemplated herein may be accomplished in any manner provided
      by
      law. The parties hereto agree that a final, non-appealable judgment in any
      such
      suit or proceeding shall be conclusive and may be enforced in other
      jurisdictions by suit on such judgment or in any other lawful manner.


    


    (b)
      Counterparts.
      This
      Agreement may be executed in two or more identical counterparts, all of which
      shall be considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and signature pages from such
      counterparts have been delivered to the Escrow Agent. 


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    


    (c)
      Headings;
      Interpretation.
      The
      headings of this Agreement are for convenience of reference and shall not form
      a
      part of, or affect the interpretation of this Agreement. As used herein, the
      masculine shall refer to the feminine and neuter, and vice versa, as the context
      may require. As used herein, unless the context clearly requires otherwise,
      the
      words “herein,” “hereunder” and “hereby,” shall refer to this entire Agreement
      and not only to the Section or paragraph in which such word appears. If any
      date
      specified herein falls upon a Saturday, Sunday or public or legal holidays,
      the
      date shall be construed to mean the next business day following such Saturday,
      Sunday or public or legal holiday. For purposes of this Agreement, a “business
      day” is any day other than a Saturday, Sunday or public or legal holiday. Each
      party intends that this Agreement be deemed and construed to have been jointly
      prepared by the parties. As a result, the parties agree that any uncertainty
      or
      ambiguity existing herein shall not be interpreted against either of them.
      

    


    (d)
      Severability.
      If any
      provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction. 

    


    (e)
      Entire
      Agreement; Amendments.
      This
      Agreement and the documents referenced herein (which are incorporated herein
      by
      reference) contain the entire understanding of the parties with respect to
      the
      matters covered herein and supersede all prior agreements, negotiations and
      understandings, written or oral, with respect to such subject matter. Except
      as
      specifically set forth herein, neither the Company nor the Lender makes any
      representation, warranty, covenant or undertaking with respect to such matters.
      No provision of this Agreement or the other Closing Documents shall be waived
      or
      amended other than by an instrument in writing signed by the Company and the
      Lender. No delay or omission of any party hereto in exercising any right or
      remedy hereunder shall constitute a waiver of such right or remedy, and no
      waiver as to any obligation shall operate as a continuing waiver or as a waiver
      of any subsequent breach. 

    


    (f)
      Notices.
      Any
      notices required or permitted to be given under the terms of this Agreement
      shall be in writing and sent by U. S. Mail or delivered personally or by
      overnight courier or via facsimile (if via facsimile, to be followed within
      one
      (1) business day by an original of the notice document via overnight courier)
      and shall be effective (i) five (5) days after being placed in the mail, if
      mailed, certified or registered, return receipt requested, (ii) upon receipt,
      if
      delivered personally or (iii) one (1) day after facsimile transmission or
      delivery to a courier service for overnight delivery, in each case properly
      addressed to the party to receive the same. The addresses for such
      communications shall be as follows: 

    


    
      	
              If
                to the Company:

            	
              Knight
                Energy Corp., Attn.: President

              909
                Lake Carolyn Parkway, Suite 850

              Irving,
                Texas 75039

              Telephone:
                (972) 401-1133

              Facsimile:
                (972) 444-9981

              E-mail:
                brucearthurhall@verizon.net

            


    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    


    
      	
              If
                to the Lender:

            	
              HD
                Special-Situations, LP

              425
                California Street, Suite 1200

              San
                Francisco, California 94104

              Attention:
                Todd Blankfort

              Telephone:
                (415) 277-2293

              Facsimile:
                (415) 236-6023

              E-mail:
                todd@hdcap.com

            


    

    


    Each
      party shall provide written notice to the other parties of any change in
      address. 

     

    (g)
      Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and permitted assigns. The Company shall not assign
      this Agreement or any rights or obligations hereunder without the prior written
      consent of the Lender. The Lender may assign any or all of its rights under
      this
      Agreement to any person or entity to whom the Lenderassigns or transfers the
      Note pursuant to Section 5(a) above; provided, however, that such transferee
      shall agree in writing to be bound by the provisions of the Closing Documents
      that apply to the “Lender” with respect to the transferred Note. Notwithstanding
      anything herein to the contrary, the Lender may pledge all or any part of the
      Note as collateral for a bona fide loan pursuant to a security agreement with
      a
      third party lender which is an accredited investor, and such pledge shall not
      be
      considered an assignment in violation of this Agreement so long as (i) it is
      made in compliance with all applicable laws and (ii) such third-party lender
      shall assume the rights, and be bound by the obligations, of the Lender
      specified in the Closing Documents. 

    


    (h)
      No
      Third Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other person. 

    


    (i)
      Survival.
      Unless
      this Agreement is terminated under Section 8(l) below, the representations,
      warranties and agreements of the Company and the Lender contained herein shall
      survive the Closing. 

    


    (j)
      Publicity.
      The
      Company and the Lender shall have the right to review (but not the right to
      approve), before issuance by the other, any press releases or other public
      statements with respect to the transactions contemplated hereby, including
      a
“tombstone” describing the financing provided pursuant to this Agreement.


    


    (k)
      Further
      Assurance.
      Each
      party shall do and perform, or cause to be done and performed, at its expense,
      all such further acts and things, and shall execute and deliver all such other
      agreements, certificates, instruments and documents, as the other party may
      reasonably request in order to carry out the intent and accomplish the purposes
      of this Agreement and the consummation of the transactions contemplated hereby.
      


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    


    (l)
      Termination.
      In the
      event that the Closing shall not have occurred on or before July 15, 2008,
      this
      Agreement may be terminated at any time thereafter by written notice from one
      party to the others. Such termination shall not be the sole remedy for a breach
      of this Agreement by the non-breaching party, and each party shall retain all
      of
      its rights hereunder at law or in equity. Notwithstanding anything herein to
      the
      contrary, a party whose breach of a covenant or representation and warranty
      or
      failure to satisfy a condition prevented the Closing shall not be entitled
      to
      terminate this Agreement. 

    


    (m)
      Remedies.
      No
      provision of this Agreement providing for any specific remedy to a party shall
      be construed to limit such party to the specific remedy described, and any
      other
      remedy that would otherwise be available to such party at law or in equity
      shall
      also be available. The parties also intend that the rights and remedies
      hereunder be cumulative, so that exercise of any one or more of such rights
      or
      remedies shall not preclude the later or concurrent exercise of any other rights
      or remedies. 

    


    (n)
      Attorney’s
      Fees.
      If any
      party to this Agreement shall bring any action for relief against the other
      arising out of or in connection with this Agreement, in addition to all other
      remedies to which the prevailing party may be entitled, the losing party shall
      be required to pay to the prevailing party a reasonable sum for attorney’s fees
      and costs incurred in bringing such action and/or enforcing any judgment granted
      therein, all of which shall be deemed to have accrued upon the commencement
      of
      such action and shall be paid whether or not such action is prosecuted to
      judgment. Any judgment or order entered in such action shall contain a specific
      provision providing for the recovery of attorney’s fees and costs incurred in
      enforcing such judgment. For the purposes of this Section, attorney’s fees shall
      include, without limitation, fees incurred with respect to the following: (i)
      post-judgment motions, (ii) contempt proceedings, (iii) garnishment, levy and
      debtor and third party examinations, (iv) discovery and (v) bankruptcy
      litigation. 

    


    IN
      WITNESS WHEREOF, the Lender and the Company have caused this Agreement to be
      duly executed by their respective authorized persons on the date first written
      above. 

     

    
      	
               

            	
              The
                Company:

            
	
               

            	
               

            
	
               

            	
              KNIGHT
                ENERGY CORP.

            
	
               

            	
               

            
	
               

            	
              By:

            	
                 

            
	
               

            	
              Title:

            	
                 

            
	
               

            	
               

            	
               

            
	
               

            	
              By:

            	
                 

            
	
               

            	
              Title:

            	
                 

            
	
               

            	
               

            	
               

            
	
               

            	
              The
                Lender:

            
	
               

            	
               

            	
               

            
	
               

            	
              HD
                SPECIAL-SITUATIONS, LP

            
	 	 	 
	 	
              By:

            	 

	 	
              Title:

            	 



    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    


    LIST
      OF EXHIBITS AND SCHEDULES 

     

    Schedule
      of Lenders 

     

    
      	
              Exhibit
                A

            	
              Form
                of 15% Senior Secured Promissory Note 

            
	
              Exhibit
                B

            	
              Amendment
                to Security Agreement 

            
	
              Exhibit
                C

            	
              Amendment
                to Corporate Guaranty 

            
	
              Exhibit
                D

            	
              Amendment
                to Deed of Trust, Security Agreement, Assignment of Production
                and Financing Statement 

            
	
              Exhibit
                E

            	
              Disbursement
                Instructions 

            
	
              Exhibit
                F

            	
              Escrow
                Agreement 

            


    

    


    Schedule
      3(c)

    Schedule
      3(d)

    Schedule
      3(f)

    Schedule
      3(g)

    Schedule
      3(i)

    Schedule
      3(k)

    Schedule
      3(l)

    Schedule
      4(f) 

     

    SCHEDULE
      OF LENDERS 

     

    
      	
              Name
                of Lender 

            	 	
              Purchase Price and Note Principal

            	 
	
              HD
                Special-Situations, LP 

            	 	
              $

            	
              2,500,000

            	 


    

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    


    SCHEDULE
      3(c)

     

    The
      Company currently has 5,300,000 warrants outstanding as follows: 

     

    
      	
              Nortia
                Capital Partners, Inc.: 

            	
              2,500,000;
                1,250,000 at $.50 and 1,250,000 at $1.00 expiring March 10, 2010
                

            
	 	 
	
              Lake
                Capital AG: 

            	
              2,500,000;
                1,250,000 at $.50 and 1,250,000 at $1.00 expiring
                March 10, 2010 

            
	 	 
	
              Com-Advise:
                

            	
              300,000
                at $3.00 expiring October 1, 2008 

            


    

    


    SCHEDULE
      3(d) 

     

    None
      

     

    SCHEDULE
      3(f) 

     

    None
      

     

    SCHEDULE
      3(g)

    


    None
      


    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    


    SCHEDULE
      3(i) 

     

    None
      

     

    SCHEDULE
      3(k) 

     

    None
      

     

    SCHEDULE
      3(l) 

     

    None
      


    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4(f)

    


    DRILLING
      RIG #1

    


    Inventory:
      

     

    102’
Lee
      C. Moore Derrick 

    T-20
      National Draworks-powered by rebuilt 12V92 Detroit 

    9’
H
      x
      40’ L x 16’ W substructure- 

    150
      ton
      Ideal Blocks – 4 sheave W/B5 Hook 

    Top
      Doghouse w/water tank 

    Roughneck
      Doghouse (bottom) 

    2000
      gal
& 3000 gal diesel tanks 

    5000’
4
      1⁄2” drill pipe 

    16
      drill
      collars 6 1⁄4” 

    150
      KW
      light plant w/ 292 Cummins 

    G
      D FXN
      14” 12V92 

    C-250
      15”
powered by 8V71 Detroit 

    Brewster
      150 ton swivel 

    Kelly
      & Bushings 

    17
1⁄2
      Emsco table 

    2
      Pipe
      Baskets 

    2
      sets
      pipe racks 

    Reagon
      BOP w/new bladder 

    Hydraulic
      hand pump 

    Tongs
      

    Subs
      

    New
      Lights 

    Hand
      Tools 

    Catwalk
      

    Stairways
      

    V-Door
      

    New
      Kelly
      Hose 

    Auto
      Driller – rebuilt 

    Recorder-rebuilt
      

    Straight
      Hole 


    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    


    Deviation
      spool w/ new line 

    Jets
      – new hoses
      

    Rebuilt
      Air Compressor 

    Mud
      Hopper 

    Two
      (2)
      300 bbl. steel mud pits (optional) 

    


    HORSEPOWER
      IS 750 

     

    DRILLING
      RIG #2

    Inventory:
      

     

    Lee
      C.
      Moore 102’ Derrick SN #T2702 with 4 sheaves 

    11’
      Substructure 

    (2)
      12V92
      Detroit Engines compounded, SN #12VF0182981237400
      & SN 

    #12VF0755281237B00,
      re-manufactured 

    Ideco
      H-40 Draw Works 800 HP w/ new Brakes complete w/air controls, 1” line


    Ideal
      150
      Ton Block/Hook 

    Wheeland
      6200 

    Top
      Doghouse 18’ X 8’ with knowledge box, bench and lockers. 

    Bottom
      Doghouse 20’ X 8’ with lockers, heater and parts bin 

    3000
      Gallon Fuel Tank 

    6
      Pipe
      Racks (3 sets) 

    Catwalk
      45’ X 4’ X 4’ 

    #1
      Pump -
      16V71 Detroit Engine on National 20P Pump w/20” Stroke SN #30056 

    #2
      Pump –
Wilson Snyder 14” pump powered by rebuilt 3406 

    175
      KVW
      Light Plant Powered By 671 Detroit Engine (Rebuilt) 

    45’
Kelly
      w/Bushing and Hose 

    Reagan
      BOP w/Manuel Hydraulic Pump unit 

    Geolograph
      Recorder (3264) L-3485 

    Auto
      Drill – SN #5072 

    Loading
      ramp 9’ X 20’ X 5’ 

    Brewster
      17 1⁄2” Rotary Table (Just Rebuilt) 

    Geolograph
      Weight Indicator 

    Tools
–
      (2) Tongs, Slips, 4 1⁄2” Elevators, 8’ Bales 


    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    


    300
      Barrel Water Tank w/Tool Shed Combination 

    2000
      Gallon Diesel Tank 

    (2)
      Pipe
      Baskets 

    Misc.
      Others 

    Foster
      makeup and breakout catheads 

    450
      HP
      twin disc torque converters 

    Screen
      type shale shaker – new manufactured
      

    (14)
      Collars-5 7/8” 4” Full hole w/subs 

    


    NO
      DEVIATION SURVEY TOOLS 

    ONLY
      ONE
      STEEL PIT, BARE NEEDS TO BE REWORKED 

    NO
      DRILL
      PIPE 

    BRAND
      NEW
      STRING OF 6 1⁄2” DRILL COLLARS 


    
      
        
        

      

      
        23